Dirt Cheap PlayBook May Mean A Tablet Price War Is Coming

HP couldn't afford to stay in the tablet market; RIM may not be able to afford to get out.

The BlackBerry PlayBook is a disaster, and not just because sales have collapsed. The Waterloo, Ontario-based company sold shipped 200,000 of the tablet computers last quarter, down from 500,000 during the earlier quarter.

No, it’s worse than that. BlackBerry can’t afford to exit the tablet business — as rival Hewlett-Packard did — because the QNX operating system running the PlayBook is the company’s future.

BlackBerry will be shifting its handsets over to the new software next year, so pulling the plug on the only mobile device to use the software now would be suicide.

So what now? Maybe a fire sale. Canadian cable company Rogers is selling the PlayBook, which normally starts at about $511, Canadian, to employees for $249 and up, according to Boy Genius Report. That hints price cuts for the rest of us are coming.

The result could be ugly for RIM’s profit margins. HP’s TouchPad sparked a buying frenzy at the unsustainable price of $99 because HP couldn’t afford to stay in the tablet market; RIM’s BlackBerry may have to find a price that generates similar enthusiasm because RIM can’t afford to exit the tablet market.

So who can afford to make the least amount of money for the longest here? Maybe Amazon. Analysts are guessing its forthcoming tablet will cost $250, a price that probably can’t be matched without accepting single-digit margins.

That’s an interesting challenge for a company like, say, Apple (which, granted, has done well when faced with interesting challenges). If you’re an online retailer with a profit margin of 2.38%, like Amazon, however, single-digit margins don’t look like a challenge at all, they look like an opportunity.

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“The Waterloo, Ontario-based company sold 200,000 of the tablet computers last quarter, down from 500,000 during the earlier quarter.”

No, they reported SHIPPING those numbers. They didn’t say what the actual SALES were. With the iPad, for over a year, shipments = sales, because the inventories were nearly zero. Today, the iPad inventory has stablized a bit, but it’s still not very great. (That’s one of Tim Cook’s methods–make only what you can sell.) With other tablets, there’s no easy way to measure actual sales.

Most companies cannot afford to sell at a loss for very long. RIMM can only hope to come out with a sufficiently attractive system in the future to make up for this gaffe. But if you want to play in this game, then you have to play for the long term.

Even Amazon will not make up in eBook sales for revenue lost in a highly discounted, general purpose tablet.

I see Amazon’s tablet the same way I saw their Kindle. For Amazon, it’s not about the device, it’s about the content.

The Kindle primed the eBook pump. For Amazon, eBooks were a natural. They were already the world’s largest catalog retailer, and probably the world’s largest book retailer. They had the infrastructure in place to display the catalog and take the order. Immediate fulfillment via digital download was a simple addition. eBooks have no warehousing or distribution costs. For Amazon, what’s not to like?

The fact that Kindle apps for PC, tablet, and smartphone followed was no surprise. Amazon wants to sell you eBooks. Whether you buy and read them on an actual Kindle or a device with a Kindle app doesn’t matter. I’m sure Amazon makes money on the Kindle, though it may be single digit margins, but the Kindle was simply building a market. Selling you eBooks was the point of the exercise.

Assume a tablet will be the same. A friend refers to his iPad as a “media consumption device”, and he’s quite right. An Amazon tablet will be one as well, and like the Kindle, will be a way for Amazon to sell you the content.

Broadband is becoming pervasive enough that it is feasible for many consumers to keep their media on the cloud and access it on demand. Amazon is a major player in cloud services, and has the servers and bandwidth to be where the consumer keeps their media, and the catalog to sell it to them.

Any bets we won’t see Amazon getting into the music and movie areas? It’s content they can sell you, store for you, and stream to you for a fee. If I were Netflix, I’d be really nervous about this. _____ Dennis

No doubt it was an easy business decision to make, and they were hardly innovative in thinking to do this, but from a technology perspective, the design and implementation of such an undertaking is by no means simple, especially not for a company of the size of Amazon.

I’ve some experience in this sort of area, and rest assured that building a new service that you don’t do previously in a huge corporation is no easy feat. The fact that Amazon pulled it off very well speaks highly to their technical competance.

Hate to be lame here, but it really bothers me when professional writers, people who make a living, and are paid to write have multiple obvious errors in their published articles. Can Forbes not afford editors, or do authors just not see the need to proofread before publishing?

Nook Color tablet/ereader from Barnes & Noble has been on the market for a year and sold millions of units at $250. Gives Flash, apps, videos, web, eBooks and magazines subscriptions with video inserts, and the best anti-glare coated screen on the market. Technology “leader” Amazon finally decided to catch up with the book store company by copying it’s device. Kindle only supports eBooks in its proprietary AZW format. Nook, on the other hand, supports both DRM-protected and DRM-free ebooks in ePub format thus it supports ebooks from B&N store, from any other DRM-free source on the web, and from public libraries. When you walk in with the Nook to Barnes & Noble store, you’re allowed to read any available eBook for free while in the store via free provided in the store Wi-Fi.

Yes, a fire sale might increase market share, but it will also spoil RIMs reputation even further, as the OS is simply not ready. So, it will have high support costs (lots of calls), lots of returns (the only company I know that went for the Playbook has returned all of them within less than two weeks) and that is something razor-thin margins can’t support. Especially now, that RIM is running out of cash, thanks to patent purchases and “restructuring” = layoff cost (for staff they mainly hired in the last 12 month being already on a down curve… now that is management!). They might just make the hole they are sitting in a little deeper. They are not HP, and they do not have these pockets.

Killing the playbook now, and maybe re-releasing it (or a 10″ version, as I heard as many complaints about the small screen as I have heard about the unfinished software) when QNX is really ready (and by that I mean: all native applications available, full BES support, same hardware encryption as the BB phones and a usable SDK that enables developers to make real apps), then maybe some people would give them a second chance. The “ship garbage and promise updates” ploy was working in the 80s and 90s, as everybody was doing it, today it just kills – consumers demand and are entitled to a usable product out of the box. The playbook failed by several lightyears here.